Illinois Legislature Passes Historic School-Funding Compromise

The Democratic Illinois legislature gave final passage to a new K-12 school-funding formula Tuesday, closing the door on a summer of budget turmoil that saw the end of a more than two-year fiscal standoff with the state's Republican governor but didn't resolve other long-term issues plaguing the state.

The funding formula will distribute taxpayer dollars to the state's neediest school districts first, provide more money for Chicago's hard-pressed schools and get taxpayer dollars flowing to more than 850 school districts that have already missed two rounds of state aid payments.

Still, the flurry of legislative action over the past few months, including a $5 billion income tax increase to dig the state out of a huge budget hole, won't do much to address larger financial problems in Illinois, which has the lowest bond rating of any state.

Years of skimping on retirement obligations have left the state with roughly $250 billion in pension debt -- the worst in the nation, according to Moody's Investors Service. School districts are owed an additional $1.2 billion following a more than two-year budget standoff.

Many lawmakers likened the enormity of the state's school funding woes to Illinois's record-breaking fiscal impasse, which left the state without a budget for 736 days, racked up a $14.6 billion backlog of unpaid bills and devolved into the worst state financial crisis since the Great Depression.

That stalemate came to an end just last month, after the legislature overrode the governor's veto to pass a $36 billion spending plan. The most recent debate over school funding, the last remaining piece of the budget, began three weeks later and was similarly fraught with infighting between the governor and the General Assembly.

The new funding formula, which originally had been vetoed by Gov. Bruce Rauner, won his support after legislative leaders added various concessions, including $75 million in income tax credits for those who donate money to private school scholarships.

"For far too long, too many low-income students in our state have been trapped in underfunded, failing schools," Mr. Rauner said in a statement Tuesday. "We have put aside our differences and put our kids first. It's a historic day for Illinois."

The tuition scholarship tax credit was a tough sell for Democrats, but party leaders were successful in rallying enough votes in support of the new measure.

"This is what compromise looks like this is it a bill that none of us like at 100%," said Democratic Sen. Kimberly Lightford. "This is what we needed to do to fix a flawed system."

--Heather Gillers contributed to this article.

Write to Quint Forgey at quint.forgey@dowjones.com.

(END) Dow Jones Newswires

August 29, 2017 17:09 ET (21:09 GMT)